Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To Amend NYSE Arca Rule 5.3-E To Exempt Registered Investment Companies That List Certain Categories of the Securities Defined as Derivative and Special Purpose Securities Under NYSE Arca Rules From Having To Obtain Shareholder Approval Prior to the Issuance of Securities in Connection With Certain Acquisitions of the Stock or Assets of an Affiliated Registered Investment Company, 27487-27490 [2021-10606]
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Federal Register / Vol. 86, No. 96 / Thursday, May 20, 2021 / Notices
27487
FINDING OF NO SIGNIFICANT IMPACT—Continued
Docket No ..................................
Licensee .....................................
Proposed Action ........................
Environmental Impact of Proposed Action.
Finding of No Significant Impact
Available Documents .................
72–1039.
Southern Nuclear Operating Company, Inc. (SNC).
The NRC’s review and approval of SNC’s initial DFP submitted in accordance with 10 CFR 72.30(b).
The NRC staff has determined that the proposed action, the review and approval of SNC’s initial DFP, submitted in accordance with 10 CFR 72.30(b), will not authorize changes to licensed operations or maintenance activities, or result in changes in the types, characteristics, or quantities of radiological or non-radiological effluents released into the environment from the ISFSI, or result in the creation of solid waste. Moreover, the approval of the initial DFP will not authorize any construction activity, facility modification, or other
land-disturbing activity. The NRC staff has concluded that the proposed action is a procedural and administrative action that will not have a significant impact on the environment.
The proposed action does not require changes to the ISFSI’s licensed routine operations, maintenance activities, or monitoring programs, nor does it require new construction or land-disturbing activities. The scope of
the proposed action concerns only the NRC’s review and approval of SNC’s initial DFP. The scope of the
proposed action does not include, and will not result in, the review and approval of decontamination or decommissioning activities or license termination for the ISFSI or for other parts of Vogtle Electric Generating
Plant, Units 1 and 2. Therefore, the NRC staff determined that approval of the initial DFP for the Vogtle
ISFSI will not significantly affect the quality of the human environment, and accordingly, the staff has concluded that a FONSI is appropriate. The NRC staff further finds that preparation of an environmental impact
statement (EIS) is not required.
Southern Nuclear Operating Company, Inc. ISFSI DFP, dated March 31, 2014. ADAMS Accession No.
ML14091A008.
U.S. Nuclear Regulatory Commission. EA for Final Rule-Decommissioning Planning, dated February 1, 2009.
ADAMS Accession No. ML090500648.
U.S. Nuclear Regulatory Commission. Note to File, Re: ESA Section 7 No Effect Determination for ISFSI DFP
Reviews, dated May 15, 2017. ADAMS Accession No. ML17135A062.
U.S. Nuclear Regulatory Commission. Review of the Draft EA and FONSI for the Farley and Vogtle ISFSI
DFP, dated March 9, 2021. ADAMS Accession No. ML21057A315.
U.S. Nuclear Regulatory Commission. Final EA and FONSI for the Southern Nuclear Operating Company,
Inc.’s Initial DFP Submitted in Accordance with 10 CFR 72.30(b) for Vogtle Electric Generating, Plant Units
1 and 2, ISFSI, dated May 10, 2021. ADAMS Package Accession No. ML21089A221.
Dated: May 14, 2021.
For the Nuclear Regulatory Commission.
John B. McKirgan,
Chief, Storage and Transportation Licensing
Branch, Division of Fuel Management, Office
of Nuclear Material Safety.
[FR Doc. 2021–10596 Filed 5–19–21; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91901; File No. SR–
NYSEArca–2020–54]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 2, To Amend NYSE
Arca Rule 5.3–E To Exempt Registered
Investment Companies That List
Certain Categories of the Securities
Defined as Derivative and Special
Purpose Securities Under NYSE Arca
Rules From Having To Obtain
Shareholder Approval Prior to the
Issuance of Securities in Connection
With Certain Acquisitions of the Stock
or Assets of an Affiliated Registered
Investment Company
May 14, 2021.
I. Introduction
On August 28, 2020, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend NYSE Arca Rule 5.3–
E (Corporate Governance and Disclosure
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00124
Fmt 4703
Sfmt 4703
Policies) to exempt issuers of certain
investment companies, including
Exchange Traded Funds (‘‘ETFs’’), from
the requirement to obtain shareholder
approval prior to the issuance of
securities in connection with certain
acquisitions of the stock or assets of an
affiliated registered investment
company. The proposed rule change
was published for comment in the
Federal Register on September 17,
2020.3 On October 30, 2020, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On December 1,
2020, the Exchange filed Amendment
No. 1 to the proposed rule change,
which superseded the proposed rule
change as originally filed.6 On
December 15, 2020, the Commission
published notice of Amendment No. 1
3 See Securities Exchange Act Release No. 89834
(September 11, 2020), 85 FR 58090.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 90297,
85 FR 70701 (November 5, 2020). The Commission
designated December 16, 2020, as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
disapprove, the proposed rule change.
6 Amendment No. 1 is available on the
Commission’s website at https://www.sec.gov/
comments/sr-nysearca-2020-54/
srnysearca202054.htm.
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Federal Register / Vol. 86, No. 96 / Thursday, May 20, 2021 / Notices
and instituted proceedings under
Section 19(b)(2)(B) of the Act 7 to
determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 1.8 On
March 12, 2021, the Commission
extended the period for consideration of
the proposed rule change to May 15,
2021.9 On March 25, 2021, the Exchange
submitted Amendment No. 2 to the
proposed rule change, which
superseded the proposed rule change, as
amended by Amendment No. 1.10 The
Commission has received no comments
on the proposed rule change. The
Commission is publishing this notice to
solicit comments on Amendment No. 2
from interested persons, and is
approving the proposed rule change, as
modified by Amendment No. 2, on an
accelerated basis.
II. Description of the Proposal, as
Modified by Amendment No. 2
NYSE Arca Rule 5.3–E(d)(9) requires
listed issuers to obtain shareholder
approval in connection with the
acquisition of the stock or assets of
another company if: (i) Any director,
officer, or substantial shareholder of the
listed company has a 5% or greater
interest (or such persons collectively
have a 10% or greater interest), directly
or indirectly, in the company or assets
to be acquired or in the consideration to
be paid in the transaction (or series of
related transactions) and the present or
potential issuance of common stock, or
securities convertible into or exercisable
for common stock, could result in an
increase in outstanding common shares
or voting power of 5% or more; or (ii)
the present or potential issuance of
common stock, or securities convertible
into or exercisable for common stock
(other than in a public offering for cash),
7 15
U.S.C. 78s(b)(2)(B).
Securities Exchange Act Release No. 90675,
85 FR 83121 (December 21, 2020).
9 See Securities Exchange Act Release No. 91309,
86 FR 14778 (March 18, 2021).
10 In Amendment No. 2, the Exchange: (1) Revised
the proposed rule text to state that the proposed
exemption would apply in connection with the
acquisition of the stock or assets of an affiliated
registered investment company; (2) revised the
proposed rule text to state that the proposed
exemption would apply if the transaction does not
otherwise require shareholder approval under the
Investment Company Act of 1940 (‘‘1940 Act’’) and
the rules thereunder; (3) added a statement that
Rule 17a–8 under the 1940 Act does not relieve a
fund of its obligation to obtain shareholder approval
as may be required by state law or a fund’s
organizational documents; (4) clarified the
description of Rule 17a–8 and its requirements
throughout the discussion; (5) added an explanation
for why the proposal would not present concerns
regarding voting dilution; and (6) made other
clarifications, corrections, and technical changes.
Amendment No. 2 is available on the Commission’s
website at https://www.sec.gov/comments/srnysearca-2020-54/srnysearca202054.htm.
8 See
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could result in an increase in
outstanding common shares of 20% or
more or could represent 20% or more of
the voting power outstanding before the
issuance of such stock or securities.
The Exchange proposes to exempt
issuers of certain investment companies
registered under the 1940 Act,11 that are
listed on the Exchange as Unit
Investment Trusts, Investment Company
Units, Exchange-Traded Fund Shares,
Portfolio Depositary Receipts, Managed
Fund Shares, Active Proxy Portfolio
Shares and Managed Portfolio Shares 12
(collectively, ‘‘1940 Act Securities’’),
from having to comply with the
shareholder approval requirement in
NYSE Arca Rule 5.3–E(d)(9) in
connection with the acquisition of the
stock or assets of an affiliated registered
investment company in a transaction
that complies with Rule 17a–8 under
the 1940 Act (Mergers of affiliated
companies) (‘‘Rule 17a–8’’) 13 and does
not otherwise require shareholder
approval under the 1940 Act or the rules
thereunder or any other Exchange
rule.14
Sections 17(a)(1) and (2) of the 1940
Act prohibit, among other things,
certain transactions between registered
investment companies and affiliated
persons.15 Rule 17a–8 provides an
exemption from Sections 17(a)(1) and
(2) of the 1940 Act for certain mergers
of affiliated companies, provided,
among other things, that the board of
directors of each investment company,
including a majority of the directors that
are not interested persons of the
respective investment company or of
any other company or series
participating in the transaction, must
determine that (i) participation in the
merger is in the best interests of its
respective investment company, and (ii)
the interests of the company’s existing
shareholders will not be diluted as a
result of the transaction.16 In addition,
under Rule 17a–8, an affiliated merger
must be approved by a majority of the
11 The Exchange states that approximately 88% of
securities listed on the Exchange are issued by
investment companies registered under the 1940
Act. See Amendment No. 2, supra note 10, at n.6.
12 See NYSE Arca Rules 5.2–E(h) (Unit
Investment Trusts), 5.2–E(j)(3) (Investment
Company Units), 5.2–E(j)(8) (Exchange-Traded
Fund Shares), 8.100–E (Portfolio Depositary
Receipts), 8.600–E (Managed Fund Shares), 8.601–
E (Active Proxy Portfolio Shares) and 8.900–E
(Managed Portfolio Shares) for a description of, and
listing requirements applicable to, each category of
security proposed to be exempted.
13 17 CFR 270.17a–8.
14 See proposed Rule 5.3–E.
15 See 15 U.S.C. 80a–17(a)(1)–(2). See also the
definition of ‘‘affiliated person’’ in the 1940 Act, 15
U.S.C 80a–2(a)(3).
16 See Amendment No. 2, supra note 10; 17 CFR
270.17a–8(a)(2).
PO 00000
Frm 00125
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Sfmt 4703
outstanding voting securities of the
merging company that is not the
surviving company unless certain
conditions are met.17
Because the board of each merging
company must make an affirmative
decision that the transaction is in the
best interest of its respective company
and that the transaction will not result
in dilution for existing shareholders, the
Exchange states that it believes the
provisions of Rule 17a–8 protect against
dilution and also provide safeguards for
existing shareholders when the
transaction involves a director, officer,
or substantial shareholder of the listed
company that has a significant interest
in the company or assets to be acquired
or the consideration to be paid and
therefore may benefit from the
transaction.18 In addition, the Exchange
explains that Rule 17a–8 does not
require the surviving company to obtain
shareholder approval in connection
with the merger of an affiliated
company. The Exchange states that it
therefore believes that it is appropriate
to exempt issuers of 1940 Act Securities
from having to comply with the
shareholder approval requirement in
NYSE Arca Rule 5.3–E(d)(9) in
connection with the acquisition of the
stock or assets of an affiliated registered
investment company in a transaction
that complies with Rule 17a–8, which
the Exchange states can be both time
consuming and expensive.19
Notwithstanding the proposed
exemption, the Exchange states that
other provisions of Exchange rules or
the 1940 Act and the rules thereunder
may require shareholder approval and
will still apply.20 The Exchange also
states that the adopting release for Rule
17a–8 specifically noted that nothing in
Rule 17a–8 relieves a fund of its
obligation to obtain shareholder
approval as may be required by state
law or a fund’s organizational
documents.21
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change, as
17 17
CFR 270.17a–8(a)(3).
Amendment No. 2, supra note 10, at 6.
With respect to voting dilution, the Exchange cited
to a prior filing in which it stated that holders of
derivative and special purpose securities either do
not have the right to elect directors at annual
meetings or have the right to elect directors only in
very limited circumstances. See id. at n. 11 (citing
Securities Exchange Act Release No. 83324 (May
24, 2018), 83 FR 25076 (May 31, 2018) (SR–
NYSEArca–2018–31)).
19 See Amendment No. 2, supra note 10, at 5–6.
20 See id. at 8.
21 See id. at n. 5 (citing Investment Company Act
Release No. 25666, 67 FR 48511 (July 24, 2002) at
n. 18).
18 See
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Federal Register / Vol. 86, No. 96 / Thursday, May 20, 2021 / Notices
modified by Amendment No. 2, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.22 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,23 which requires,
among other things, that the rules of a
national securities exchange be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and
are not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
The Commission finds that the
Exchange’s proposal to exempt issuers
of 1940 Act Securities from the
obligation to obtain shareholder
approval pursuant to NYSE Arca Rule
5.3–E(d)(9) when they issue securities in
connection with the acquisition of the
stock or assets of an affiliated registered
investment company in a transaction
that complies with Rule 17a–8 is
consistent with the Act. The corporate
governance standards embodied in the
listing standards of national securities
exchanges, in particular, play an
important role in ensuring that
exchange-listed companies observe good
governance practices, including
safeguarding the interests of
shareholders with respect to certain
potentially dilutive transactions.24 The
Commission believes the right of
shareholders to vote in connection with
22 15 U.S.C. 78f(b). In approving this proposed
rule change, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
23 15 U.S.C. 78f(b)(5).
24 See, e.g., Securities Exchange Act Release No.
48108 (June 30, 2003), 68 FR 39995 (July 3, 2003)
(approving equity compensation shareholder
approval rules of both the NYSE and the National
Association of Securities Dealers, Inc. n/k/a
NASDAQ); Securities Exchange Act Release No.
76814 (December 31, 2015), 81 FR 820 (January 7,
2016) (NYSE–2015–02) (approving amendments to
the NYSE Listed Company Manual to exempt early
stage companies from requirements to obtain
shareholder approval in certain circumstances);
Securities Exchange Act Release No. 84287
(September 26, 2018) 83 FR 49599 (October 2, 2018)
(NASDAQ–2018–008) (approving a Nasdaq
proposal to change to the definition of market value
for purposes of the shareholder approval rule and
eliminate the requirement for shareholder approval
of issuances at less than book value but greater than
market value). See also Securities Exchange Act
Release No. 58375 (August 18, 2008), 73 FR 49498
(August 21, 2008) (approving registration of BATS
Exchange, Inc. noting that qualitative listing
requirements including shareholder approval rules
are designed to ensure that companies trading on
a national securities exchange will adequately
protect the interest of public shareholders).
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17:36 May 19, 2021
Jkt 253001
the acquisition of the stock or assets of
another company in circumstances that
may give rise to dilution or where there
may be conflicts of interests is an
essential and important one.25 The
Commission, however, believes that,
because of the requirements set forth in
Rule 17a–8, the requirement to obtain
shareholder approval under the
Exchange’s rules may not be necessary
for issuers of 1940 Act Securities in
connection with a transaction that
complies with Rule 17a–8 and does not
otherwise require shareholder approval
under the 1940 Act and the rules
thereunder or any other Exchange
rule.26
Specifically, as discussed above, in
the case of a merger of affiliated
registered investment companies, Rule
17a–8 requires with respect to each
registered investment company
participating in the merger that the
board of directors, including a majority
of the directors who are not interested
persons of the registered investment
company or any other company or series
participating in the merger, determines
that (i) participation in the merger is in
the best interest of the registered
investment company, and (ii) the
interests of the registered investment
company’s existing shareholders will
not be diluted as a result of the
merger.27 The Commission believes
these requirements, including the
requirement that a majority of directors
who are not interested persons of the
registered investment company or any
other company or series participating in
the merger make such determinations,
should act as a safeguard for
shareholders against dilution and
conflicts of interest.28 As a result of the
25 See, e.g., Securities Exchange Act Release Nos.
86406 (July 18, 2019), 84 FR 35431, 35432 (July 23,
2019) (NYSE–2019–20); 57268 (February 4, 2008),
84 FR 7614, 7616 (February 8, 2008) (AMEX–2006–
31).
26 While Rule 17a–8 requires an affiliated merger
to be approved by a majority of the outstanding
voting securities of the merging company that is not
the surviving company unless certain conditions
are met, Rule 17a–8 does not include a requirement
for a registered investment company that is the
surviving company to obtain shareholder approval
in connection with the merger of an affiliated
company. See 17 CFR 270.17a–8(a)(3).
27 17 CFR 270.17a–8(a)(2).
28 The Commission previously stated when
approving amendments to Rule 17a–8 that ‘‘[t]he
rule will continue to require that each fund’s board
(including a majority of disinterested directors)
determine that the merger is in the best interests of
the fund and will not dilute the interests of
shareholders. These are critical determinations
boards must carefully consider, particularly when
the merger involves significant conflicts of
interest.’’ See Investment Company Act Release No.
25666, July 18, 2002, 67 FR 48511 at 48513 (July
24, 2002). The Commission also stated that
directors must request and evaluate any information
reasonably necessary to their determinations, and
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27489
requirements of Rule 17a–8, the risk of
dilution to existing shareholders as a
result of an issuance of shares by an
issuer of 1940 Act Securities in
connection with the acquisition of the
stock or assets of an affiliated registered
investment company that complies with
Rule 17a–8 is sufficiently mitigated. For
the same reasons, the Commission
believes that the requirements of Rule
17a–8 should help to ensure that
conflicts of interests are carefully
considered by the board of directors and
a majority of the directors who are not
interested persons that are required to
approve the acquisition, including in
cases where shareholder approval
would normally be required under the
Exchange’s rules if such transaction
involves a director, officer, or
substantial shareholder of the listed
company that has an interest in the
company or assets to be acquired or the
consideration to be paid.29
The proposed exemption from the
shareholder approval requirements in
NYSE Arca Rule 5.3–E(d)(9) is limited
in scope. In particular, the proposed
exemption from NYSE Arca Rule 5.3–
E(d)(9) is limited to issuers of 1940 Act
Securities only in connection with the
acquisition of the stock or assets of an
affiliated registered investment
company if such transaction complies
with Rule 17a–8. Furthermore,
notwithstanding the proposed
exemption from the shareholder
approval requirement in NYSE Arca
Rule 5.3–E(d)(9), other provisions of the
Exchange rules, or the 1940 Act and the
rules thereunder will still apply and
may require shareholder approval.30
Further, the adopting release for Rule
17a–8 specifically stated that nothing in
Rule 17a–8 relieves a fund of its
obligation to obtain shareholder
approval as may be required by state
law or a fund’s organizational
documents.31 Thus, an issuer of a 1940
consider and give appropriate weight to all
pertinent factors in making their findings under the
rule, and in fulfilling the overall duty of care. Id.
See also Rule 17a–8(a)(2)(ii).
29 The Commission notes that it also previously
approved an NYSE rule proposal that exempted
registered investment companies under the 1940
Act from a broker vote prohibition for election of
directors. In approving the proposal the
Commission concluded that the different regulatory
regime for registered investment companies
supports the exemption. See Securities Exchange
Act Release No. 60215 (July 1, 2009), 74 FR 33293
(July 10, 2009) (SR–NYSE–2006–92), at 33303.
30 See NYSEArca Rule 5.3–E(d), which sets forth
the Exchange’s shareholder approval requirements,
including, among others, for issuances involving a
change of control and equity compensation. If
shareholder approval is not required under one
provision of the Exchange’s rule, it may still be
required under another provision of the rule.
31 See supra note 21.
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Federal Register / Vol. 86, No. 96 / Thursday, May 20, 2021 / Notices
Act Security may still be required to
obtain shareholder approval in
connection with the acquisition of the
stock or assets of an affiliated company
even if such transaction complies with
Rule 17a–8 if such transaction would
require shareholder approval under
other applicable Exchange rules,
another provision of the 1940 Act or the
rules and regulations thereunder, state
law, or a fund’s organizational
documents.
IV. Solicitation of Comments on
Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning whether
Amendment No. 2 to the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2020–54 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2020–54. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
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17:36 May 19, 2021
Jkt 253001
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2020–54, and
should be submitted on or before June
10, 2021.
V. Accelerated Approval of the
Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 2 in the Federal
Register. In Amendment No. 2, the
Exchange: (1) Revised the proposed rule
text to state that the proposed
exemption would apply in connection
with the acquisition of the stock or
assets of an affiliated registered
investment company; (2) revised the
proposed rule text to state that the
proposed exemption would apply if the
transaction does not otherwise require
shareholder approval under the 1940
Act and the rules thereunder; (3) added
a statement that Rule 17a–8 does not
relieve a fund of its obligation to obtain
shareholder approval as may be
required by state law or a fund’s
organizational documents; (4) clarified
the description of Rule 17a–8 and its
requirements throughout the discussion;
(5) added an explanation for why the
proposal would not present concerns
regarding voting dilution; and (6) made
other clarifications, corrections, and
technical changes.32 Amendment No. 2
provided greater clarity to the proposal.
The changes and additional clarifying
information in Amendment No. 2
strengthen the proposal and assist the
Commission in evaluating the
Exchange’s proposal and in determining
that it is consistent with the Act.
Accordingly, the Commission finds
good cause, pursuant to Section 19(b)(2)
of the Act,33 to approve the proposed
rule change, as modified by Amendment
No. 2, on an accelerated basis.
VI. Conclusion
It is Therefore Ordered, pursuant to
Section 19(b)(2) of the Act,34 that the
proposed rule change (SR–NYSEArca–
2020–54), as modified by Amendment
No. 2, be, and it hereby is, approved on
an accelerated basis.
supra note 10.
U.S.C. 78s(b)(2).
34 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–10606 Filed 5–19–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91897; File No. SR–BOX–
2021–11]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Establish Rule 7135
(Execution and Pro Rata Priority) and
Rule 8055 (Lead Market Makers)
May 14, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 29,
2021, BOX Exchange LLC (‘‘Exchange’’
or ‘‘BOX’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish
Rule 7135 (Execution and Pro Rata
Priority) and Rule 8055 (Lead Market
Makers). The text of the proposed rule
change is available from the principal
office of the Exchange, at the
Commission’s Public Reference Room
and also on the Exchange’s internet
website at https://boxoptions.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
32 See
35 17
33 15
1 15
PO 00000
Frm 00127
Fmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Sfmt 4703
E:\FR\FM\20MYN1.SGM
20MYN1
]]>Agencies
[Federal Register Volume 86, Number 96 (Thursday, May 20, 2021)]
[Notices]
[Pages 27487-27490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10606]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91901; File No. SR-NYSEArca-2020-54]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, To Amend NYSE
Arca Rule 5.3-E To Exempt Registered Investment Companies That List
Certain Categories of the Securities Defined as Derivative and Special
Purpose Securities Under NYSE Arca Rules From Having To Obtain
Shareholder Approval Prior to the Issuance of Securities in Connection
With Certain Acquisitions of the Stock or Assets of an Affiliated
Registered Investment Company
May 14, 2021.
I. Introduction
On August 28, 2020, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend NYSE Arca Rule 5.3-E (Corporate Governance and Disclosure
Policies) to exempt issuers of certain investment companies, including
Exchange Traded Funds (``ETFs''), from the requirement to obtain
shareholder approval prior to the issuance of securities in connection
with certain acquisitions of the stock or assets of an affiliated
registered investment company. The proposed rule change was published
for comment in the Federal Register on September 17, 2020.\3\ On
October 30, 2020, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ On December 1, 2020, the Exchange filed Amendment No. 1 to
the proposed rule change, which superseded the proposed rule change as
originally filed.\6\ On December 15, 2020, the Commission published
notice of Amendment No. 1
[[Page 27488]]
and instituted proceedings under Section 19(b)(2)(B) of the Act \7\ to
determine whether to approve or disapprove the proposed rule change, as
modified by Amendment No. 1.\8\ On March 12, 2021, the Commission
extended the period for consideration of the proposed rule change to
May 15, 2021.\9\ On March 25, 2021, the Exchange submitted Amendment
No. 2 to the proposed rule change, which superseded the proposed rule
change, as amended by Amendment No. 1.\10\ The Commission has received
no comments on the proposed rule change. The Commission is publishing
this notice to solicit comments on Amendment No. 2 from interested
persons, and is approving the proposed rule change, as modified by
Amendment No. 2, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 89834 (September 11,
2020), 85 FR 58090.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 90297, 85 FR 70701
(November 5, 2020). The Commission designated December 16, 2020, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ Amendment No. 1 is available on the Commission's website at
https://www.sec.gov/comments/sr-nysearca-2020-54/srnysearca202054.htm.
\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ See Securities Exchange Act Release No. 90675, 85 FR 83121
(December 21, 2020).
\9\ See Securities Exchange Act Release No. 91309, 86 FR 14778
(March 18, 2021).
\10\ In Amendment No. 2, the Exchange: (1) Revised the proposed
rule text to state that the proposed exemption would apply in
connection with the acquisition of the stock or assets of an
affiliated registered investment company; (2) revised the proposed
rule text to state that the proposed exemption would apply if the
transaction does not otherwise require shareholder approval under
the Investment Company Act of 1940 (``1940 Act'') and the rules
thereunder; (3) added a statement that Rule 17a-8 under the 1940 Act
does not relieve a fund of its obligation to obtain shareholder
approval as may be required by state law or a fund's organizational
documents; (4) clarified the description of Rule 17a-8 and its
requirements throughout the discussion; (5) added an explanation for
why the proposal would not present concerns regarding voting
dilution; and (6) made other clarifications, corrections, and
technical changes. Amendment No. 2 is available on the Commission's
website at https://www.sec.gov/comments/sr-nysearca-2020-54/srnysearca202054.htm.
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II. Description of the Proposal, as Modified by Amendment No. 2
NYSE Arca Rule 5.3-E(d)(9) requires listed issuers to obtain
shareholder approval in connection with the acquisition of the stock or
assets of another company if: (i) Any director, officer, or substantial
shareholder of the listed company has a 5% or greater interest (or such
persons collectively have a 10% or greater interest), directly or
indirectly, in the company or assets to be acquired or in the
consideration to be paid in the transaction (or series of related
transactions) and the present or potential issuance of common stock, or
securities convertible into or exercisable for common stock, could
result in an increase in outstanding common shares or voting power of
5% or more; or (ii) the present or potential issuance of common stock,
or securities convertible into or exercisable for common stock (other
than in a public offering for cash), could result in an increase in
outstanding common shares of 20% or more or could represent 20% or more
of the voting power outstanding before the issuance of such stock or
securities.
The Exchange proposes to exempt issuers of certain investment
companies registered under the 1940 Act,\11\ that are listed on the
Exchange as Unit Investment Trusts, Investment Company Units, Exchange-
Traded Fund Shares, Portfolio Depositary Receipts, Managed Fund Shares,
Active Proxy Portfolio Shares and Managed Portfolio Shares \12\
(collectively, ``1940 Act Securities''), from having to comply with the
shareholder approval requirement in NYSE Arca Rule 5.3-E(d)(9) in
connection with the acquisition of the stock or assets of an affiliated
registered investment company in a transaction that complies with Rule
17a-8 under the 1940 Act (Mergers of affiliated companies) (``Rule 17a-
8'') \13\ and does not otherwise require shareholder approval under the
1940 Act or the rules thereunder or any other Exchange rule.\14\
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\11\ The Exchange states that approximately 88% of securities
listed on the Exchange are issued by investment companies registered
under the 1940 Act. See Amendment No. 2, supra note 10, at n.6.
\12\ See NYSE Arca Rules 5.2-E(h) (Unit Investment Trusts), 5.2-
E(j)(3) (Investment Company Units), 5.2-E(j)(8) (Exchange-Traded
Fund Shares), 8.100-E (Portfolio Depositary Receipts), 8.600-E
(Managed Fund Shares), 8.601-E (Active Proxy Portfolio Shares) and
8.900-E (Managed Portfolio Shares) for a description of, and listing
requirements applicable to, each category of security proposed to be
exempted.
\13\ 17 CFR 270.17a-8.
\14\ See proposed Rule 5.3-E.
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Sections 17(a)(1) and (2) of the 1940 Act prohibit, among other
things, certain transactions between registered investment companies
and affiliated persons.\15\ Rule 17a-8 provides an exemption from
Sections 17(a)(1) and (2) of the 1940 Act for certain mergers of
affiliated companies, provided, among other things, that the board of
directors of each investment company, including a majority of the
directors that are not interested persons of the respective investment
company or of any other company or series participating in the
transaction, must determine that (i) participation in the merger is in
the best interests of its respective investment company, and (ii) the
interests of the company's existing shareholders will not be diluted as
a result of the transaction.\16\ In addition, under Rule 17a-8, an
affiliated merger must be approved by a majority of the outstanding
voting securities of the merging company that is not the surviving
company unless certain conditions are met.\17\
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\15\ See 15 U.S.C. 80a-17(a)(1)-(2). See also the definition of
``affiliated person'' in the 1940 Act, 15 U.S.C 80a-2(a)(3).
\16\ See Amendment No. 2, supra note 10; 17 CFR 270.17a-8(a)(2).
\17\ 17 CFR 270.17a-8(a)(3).
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Because the board of each merging company must make an affirmative
decision that the transaction is in the best interest of its respective
company and that the transaction will not result in dilution for
existing shareholders, the Exchange states that it believes the
provisions of Rule 17a-8 protect against dilution and also provide
safeguards for existing shareholders when the transaction involves a
director, officer, or substantial shareholder of the listed company
that has a significant interest in the company or assets to be acquired
or the consideration to be paid and therefore may benefit from the
transaction.\18\ In addition, the Exchange explains that Rule 17a-8
does not require the surviving company to obtain shareholder approval
in connection with the merger of an affiliated company. The Exchange
states that it therefore believes that it is appropriate to exempt
issuers of 1940 Act Securities from having to comply with the
shareholder approval requirement in NYSE Arca Rule 5.3-E(d)(9) in
connection with the acquisition of the stock or assets of an affiliated
registered investment company in a transaction that complies with Rule
17a-8, which the Exchange states can be both time consuming and
expensive.\19\
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\18\ See Amendment No. 2, supra note 10, at 6. With respect to
voting dilution, the Exchange cited to a prior filing in which it
stated that holders of derivative and special purpose securities
either do not have the right to elect directors at annual meetings
or have the right to elect directors only in very limited
circumstances. See id. at n. 11 (citing Securities Exchange Act
Release No. 83324 (May 24, 2018), 83 FR 25076 (May 31, 2018) (SR-
NYSEArca-2018-31)).
\19\ See Amendment No. 2, supra note 10, at 5-6.
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Notwithstanding the proposed exemption, the Exchange states that
other provisions of Exchange rules or the 1940 Act and the rules
thereunder may require shareholder approval and will still apply.\20\
The Exchange also states that the adopting release for Rule 17a-8
specifically noted that nothing in Rule 17a-8 relieves a fund of its
obligation to obtain shareholder approval as may be required by state
law or a fund's organizational documents.\21\
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\20\ See id. at 8.
\21\ See id. at n. 5 (citing Investment Company Act Release No.
25666, 67 FR 48511 (July 24, 2002) at n. 18).
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as
[[Page 27489]]
modified by Amendment No. 2, is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to a national
securities exchange.\22\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\23\
which requires, among other things, that the rules of a national
securities exchange be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest, and are not designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
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\22\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\23\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the Exchange's proposal to exempt issuers
of 1940 Act Securities from the obligation to obtain shareholder
approval pursuant to NYSE Arca Rule 5.3-E(d)(9) when they issue
securities in connection with the acquisition of the stock or assets of
an affiliated registered investment company in a transaction that
complies with Rule 17a-8 is consistent with the Act. The corporate
governance standards embodied in the listing standards of national
securities exchanges, in particular, play an important role in ensuring
that exchange-listed companies observe good governance practices,
including safeguarding the interests of shareholders with respect to
certain potentially dilutive transactions.\24\ The Commission believes
the right of shareholders to vote in connection with the acquisition of
the stock or assets of another company in circumstances that may give
rise to dilution or where there may be conflicts of interests is an
essential and important one.\25\ The Commission, however, believes
that, because of the requirements set forth in Rule 17a-8, the
requirement to obtain shareholder approval under the Exchange's rules
may not be necessary for issuers of 1940 Act Securities in connection
with a transaction that complies with Rule 17a-8 and does not otherwise
require shareholder approval under the 1940 Act and the rules
thereunder or any other Exchange rule.\26\
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\24\ See, e.g., Securities Exchange Act Release No. 48108 (June
30, 2003), 68 FR 39995 (July 3, 2003) (approving equity compensation
shareholder approval rules of both the NYSE and the National
Association of Securities Dealers, Inc. n/k/a NASDAQ); Securities
Exchange Act Release No. 76814 (December 31, 2015), 81 FR 820
(January 7, 2016) (NYSE-2015-02) (approving amendments to the NYSE
Listed Company Manual to exempt early stage companies from
requirements to obtain shareholder approval in certain
circumstances); Securities Exchange Act Release No. 84287 (September
26, 2018) 83 FR 49599 (October 2, 2018) (NASDAQ-2018-008) (approving
a Nasdaq proposal to change to the definition of market value for
purposes of the shareholder approval rule and eliminate the
requirement for shareholder approval of issuances at less than book
value but greater than market value). See also Securities Exchange
Act Release No. 58375 (August 18, 2008), 73 FR 49498 (August 21,
2008) (approving registration of BATS Exchange, Inc. noting that
qualitative listing requirements including shareholder approval
rules are designed to ensure that companies trading on a national
securities exchange will adequately protect the interest of public
shareholders).
\25\ See, e.g., Securities Exchange Act Release Nos. 86406 (July
18, 2019), 84 FR 35431, 35432 (July 23, 2019) (NYSE-2019-20); 57268
(February 4, 2008), 84 FR 7614, 7616 (February 8, 2008) (AMEX-2006-
31).
\26\ While Rule 17a-8 requires an affiliated merger to be
approved by a majority of the outstanding voting securities of the
merging company that is not the surviving company unless certain
conditions are met, Rule 17a-8 does not include a requirement for a
registered investment company that is the surviving company to
obtain shareholder approval in connection with the merger of an
affiliated company. See 17 CFR 270.17a-8(a)(3).
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Specifically, as discussed above, in the case of a merger of
affiliated registered investment companies, Rule 17a-8 requires with
respect to each registered investment company participating in the
merger that the board of directors, including a majority of the
directors who are not interested persons of the registered investment
company or any other company or series participating in the merger,
determines that (i) participation in the merger is in the best interest
of the registered investment company, and (ii) the interests of the
registered investment company's existing shareholders will not be
diluted as a result of the merger.\27\ The Commission believes these
requirements, including the requirement that a majority of directors
who are not interested persons of the registered investment company or
any other company or series participating in the merger make such
determinations, should act as a safeguard for shareholders against
dilution and conflicts of interest.\28\ As a result of the requirements
of Rule 17a-8, the risk of dilution to existing shareholders as a
result of an issuance of shares by an issuer of 1940 Act Securities in
connection with the acquisition of the stock or assets of an affiliated
registered investment company that complies with Rule 17a-8 is
sufficiently mitigated. For the same reasons, the Commission believes
that the requirements of Rule 17a-8 should help to ensure that
conflicts of interests are carefully considered by the board of
directors and a majority of the directors who are not interested
persons that are required to approve the acquisition, including in
cases where shareholder approval would normally be required under the
Exchange's rules if such transaction involves a director, officer, or
substantial shareholder of the listed company that has an interest in
the company or assets to be acquired or the consideration to be
paid.\29\
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\27\ 17 CFR 270.17a-8(a)(2).
\28\ The Commission previously stated when approving amendments
to Rule 17a-8 that ``[t]he rule will continue to require that each
fund's board (including a majority of disinterested directors)
determine that the merger is in the best interests of the fund and
will not dilute the interests of shareholders. These are critical
determinations boards must carefully consider, particularly when the
merger involves significant conflicts of interest.'' See Investment
Company Act Release No. 25666, July 18, 2002, 67 FR 48511 at 48513
(July 24, 2002). The Commission also stated that directors must
request and evaluate any information reasonably necessary to their
determinations, and consider and give appropriate weight to all
pertinent factors in making their findings under the rule, and in
fulfilling the overall duty of care. Id. See also Rule 17a-
8(a)(2)(ii).
\29\ The Commission notes that it also previously approved an
NYSE rule proposal that exempted registered investment companies
under the 1940 Act from a broker vote prohibition for election of
directors. In approving the proposal the Commission concluded that
the different regulatory regime for registered investment companies
supports the exemption. See Securities Exchange Act Release No.
60215 (July 1, 2009), 74 FR 33293 (July 10, 2009) (SR-NYSE-2006-92),
at 33303.
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The proposed exemption from the shareholder approval requirements
in NYSE Arca Rule 5.3-E(d)(9) is limited in scope. In particular, the
proposed exemption from NYSE Arca Rule 5.3-E(d)(9) is limited to
issuers of 1940 Act Securities only in connection with the acquisition
of the stock or assets of an affiliated registered investment company
if such transaction complies with Rule 17a-8. Furthermore,
notwithstanding the proposed exemption from the shareholder approval
requirement in NYSE Arca Rule 5.3-E(d)(9), other provisions of the
Exchange rules, or the 1940 Act and the rules thereunder will still
apply and may require shareholder approval.\30\ Further, the adopting
release for Rule 17a-8 specifically stated that nothing in Rule 17a-8
relieves a fund of its obligation to obtain shareholder approval as may
be required by state law or a fund's organizational documents.\31\
Thus, an issuer of a 1940
[[Page 27490]]
Act Security may still be required to obtain shareholder approval in
connection with the acquisition of the stock or assets of an affiliated
company even if such transaction complies with Rule 17a-8 if such
transaction would require shareholder approval under other applicable
Exchange rules, another provision of the 1940 Act or the rules and
regulations thereunder, state law, or a fund's organizational
documents.
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\30\ See NYSEArca Rule 5.3-E(d), which sets forth the Exchange's
shareholder approval requirements, including, among others, for
issuances involving a change of control and equity compensation. If
shareholder approval is not required under one provision of the
Exchange's rule, it may still be required under another provision of
the rule.
\31\ See supra note 21.
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IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 to the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2020-54 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2020-54.
This file number should be included on the subject line if email is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549, on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2020-54, and should
be submitted on or before June 10, 2021.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
2 in the Federal Register. In Amendment No. 2, the Exchange: (1)
Revised the proposed rule text to state that the proposed exemption
would apply in connection with the acquisition of the stock or assets
of an affiliated registered investment company; (2) revised the
proposed rule text to state that the proposed exemption would apply if
the transaction does not otherwise require shareholder approval under
the 1940 Act and the rules thereunder; (3) added a statement that Rule
17a-8 does not relieve a fund of its obligation to obtain shareholder
approval as may be required by state law or a fund's organizational
documents; (4) clarified the description of Rule 17a-8 and its
requirements throughout the discussion; (5) added an explanation for
why the proposal would not present concerns regarding voting dilution;
and (6) made other clarifications, corrections, and technical
changes.\32\ Amendment No. 2 provided greater clarity to the proposal.
The changes and additional clarifying information in Amendment No. 2
strengthen the proposal and assist the Commission in evaluating the
Exchange's proposal and in determining that it is consistent with the
Act. Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\33\ to approve the proposed rule change, as
modified by Amendment No. 2, on an accelerated basis.
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\32\ See supra note 10.
\33\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-NYSEArca-2020-54), as
modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
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\34\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10606 Filed 5-19-21; 8:45 am]
BILLING CODE 8011-01-P
